Goldman Sachs avoiding the 50p rate proves the folly of cutting it too soon

The 45p rate gets an artificial boost while 50p is made worse in comparison.

Goldman Sachs is considering whether to defer bonuses for its employees into the new tax year, starting 6 April, in order to avoid the 50p tax rate.

The Guardian's Jill Treanor reports:

A number of banks are known to have considered whether to make the move, which would save their top employees thousands of pounds. But City sources believe many of them have rejected the idea to avoid any negative publicity in the wake of the row surrounding corporation tax paid by Starbucks in the UK.

The Wall Street firm – which publishes its full year results on Wednesday and tells staff their bonuses for 2012 shortly afterwards – is not thought to be considering changing the way the bonuses for 2012 are handed out. The proposal being considered would benefit parts of bonuses deferred from the years 2009, 2010 and 2011, which are due to be handed to staff this year in the form of shares.

The move underlines the lack of evidence available that the 50p rate actually hurt revenues. HMRC's analysis in March last year determined that the optimal tax rate was 48 per cent, a figure which 1) didn't justify cutting the rate to 45 per cent and 2) was only derived due to a specific statistic – TIE, taxable income elasticity – being given a value of 0.45. Given studies cited by HMRC for TIE showed it being anywhere from -0.6 to 2.75, there's rather a lot of uncertainty in that analysis.

But the bigger problem for evidence of the tax cut's effects is that, in cutting the 50p rate so rapidly, the Chancellor destroyed the possibility that we might actually get some useful data. The most effective way to avoid the tax is to shift income forward or backward. As a result, the first year it was in operation revealed that £6.6bn of taxable income had been shifted forward by a year; and we now know that this year, the last it will be in operation, a significant chink of income will be shifted back to the 2013/14 tax year.

Add in the fact that even HMRC assumed that some income in 2011/12 will have been declared in 2009/10, and some more will have been coincidentally forestalled to 2012/13 (when it could be forestalled further to 2013/14), and it is clear: there has not been a single year when a "normal" amount of tax was paid at the 50p rate. Every year it was in operation will have resulted in an artificially depressed take.

Similarly, the 45p rate will, for the first few years of its operation, have an artificially boosted take. It will look far more effective at discouraging tax avoidance than it actually is.

Consider this a warning, then: 2014 will see a lot of attempts to misuse data to prove a point. Don't take it at face value.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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No, Jeremy Corbyn did not refuse to condemn the IRA. Please stop saying he did

Guys, seriously.

Okay, I’ll bite. Someone’s gotta say it, so really might as well be me:

No, Jeremy Corbyn did not, this weekend, refuse to condemn the IRA. And no, his choice of words was not just “and all other forms of racism” all over again.

Can’t wait to read my mentions after this one.

Let’s take the two contentions there in order. The claim that Corbyn refused to condem the IRA relates to his appearance on Sky’s Sophy Ridge on Sunday programme yesterday. (For those who haven’t had the pleasure, it’s a weekly political programme, hosted by Sophy Ridge and broadcast on a Sunday. Don’t say I never teach you anything.)

Here’s how Sky’s website reported that interview:

 

The first paragraph of that story reads:

Labour leader Jeremy Corbyn has been criticised after he refused five times to directly condemn the IRA in an interview with Sky News.

The funny thing is, though, that the third paragraph of that story is this:

He said: “I condemn all the bombing by both the loyalists and the IRA.”

Apparently Jeremy Corbyn has been so widely criticised for refusing to condemn the IRA that people didn’t notice the bit where he specifically said that he condemned the IRA.

Hasn’t he done this before, though? Corbyn’s inability to say he that opposed anti-semitism without appending “and all other forms of racism” was widely – and, to my mind, rightly – criticised. These were weasel words, people argued: an attempt to deflect from a narrow subject where the hard left has often been in the wrong, to a broader one where it wasn’t.

Well, that pissed me off too: an inability to say simply “I oppose anti-semitism” made it look like he did not really think anti-semitism was that big a problem, an impression not relieved by, well, take your pick.

But no, to my mind, this....

“I condemn all the bombing by both the loyalists and the IRA.”

...is, despite its obvious structural similarities, not the same thing.

That’s because the “all other forms of racism thing” is an attempt to distract by bringing in something un-related. It implies that you can’t possibly be soft on anti-semitism if you were tough on Islamophobia or apartheid, and experience shows that simply isn’t true.

But loyalist bombing were not unrelated to IRA ones: they’re very related indeed. There really were atrocities committed on both sides of the Troubles, and while the fatalities were not numerically balanced, neither were they orders of magnitude apart.

As a result, specifically condemning both sides as Corbyn did seems like an entirely reasonable position to take. Far creepier, indeed, is to minimise one set of atrocities to score political points about something else entirely.

The point I’m making here isn’t really about Corbyn at all. Historically, his position on Northern Ireland has been pro-Republican, rather than pro-peace, and I’d be lying if I said I was entirely comfortable with that.

No, the point I’m making is about the media, and its bias against Labour. Whatever he may have said in the past, whatever may be written on his heart, yesterday morning Jeremy Corbyn condemned IRA bombings. This was the correct thing to do. His words were nonetheless reported as “Jeremy Corbyn refuses to condemn IRA”.

I mean, I don’t generally hold with blaming the mainstream media for politicians’ failures, but it’s a bit rum isn’t it?

Jonn Elledge edits the New Statesman's sister site CityMetric, and writes for the NS about subjects including politics, history and Daniel Hannan. You can find him on Twitter or Facebook.

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